Rising Price of Materials

If you haven't noticed, the price of us silversmiths' main material -- Silver -- just reached another high today. As I write this it is sitting at $19.20/oz... whoa!! I check the price everyday and I have been watching it creep up little by little to where it is now from around $4.50/oz in 2001.

Except for the historic and failed attempt by the Hunt Brothers that drove the price up to $48.70 an ounce for a short time in 1980, the price of silver has remained low and an affordable material for hobbyists and jewelers. Now this (close to) $20/oz is really causing some changes in the jewelry industry. I don't see the price going back down.

I am not a financial analyst or a commodity trader but I know enough about what is happening to know that the price rise is caused by two things. Mainly it is a reflection of the weak US Dollar. For example, what I use to pay for a 200 ounce order of silver in 2001 (at $4.50/oz) was around $1200 which included fabrication charges and some shipping. That same order would now cost me over $4000. That price is an indication of what the dollar is worth and not based on the quantity of silver that is present in the planet. There is a lot of Silver!! I read once in an encyclopedia that most silver is micro-crystalline in form (not nuggets) and is actually a bi-product of other metal smelting processes targeting nickel, copper, etc., which are in even more demand than silver.

The other factor is actually the same one -- as the dollar weakens, more and people are using Silver as an investment strategy (along with Gold). Basic supply and demand working here, the more people that want something, the more the price rises.

So what do us craftsmen and hobbyists do? We really don't have much choice, just like we don't have any choice about the price of gasoline, so we must pay the price what ever it is. The good news is that it is clearing the field of people who have a ceiling on the price they can pay to create a product that has a preset cost. In other words, if somebody wants to make a piece of jewelry that wholesales for $8 they must reverse design their costs and at this point there is not a lot of cheap stuff that can be made using the current prices of metals.

I asked an associate in the manufacturing sector what he thought about this (actually, this was a couple weeks ago and Silver was only $16/oz) and he me told this: The trend will be in Stainless Steel, Silver with Gold accents, a lot of 10K gold and the manufacturing in the US will be ALL big-ticket. I am curious to see what will be in all the department stores showcases next season.

The good news is that as it becomes more and more difficult for the major manufacturers to pump out cheap goods (China, India) it creates more room for small merchants to fill in the space. That small merchant is YOU and ME!! The world is moving more towards handmade items and quality and away from mass consumerism. Another indication that this is true is the number of people who are making sales via the internet (eBay, Etsy, etc), home jewelry parties, and at shows.

What we must do is pay what we have to for the materials we need and adjust our prices accordingly. Actually, I am encouraged -- I have been selling my jewelry for a lot less than I wanted to for many years, and even though now I must pay more for my stock, I am actually realizing more profit due to the markup. Another really cool thing is that more people will be able to start craft ventures (woodworking, pottery, etc.) and make a living while joining the 'work at home' crowd... you've heard of that, right? Remember, one also gains tax incentives (write-offs) with owning a business.

So don't despair! Let's all stick together and support each other in our quests to learn the arts that we have only dreamed of in the past. I pledge my help to all those that I can reach with this Blog and through my classes. I encourage you again to subscribe so you don't miss anything. In my next post I will begin discussing tools -- what do you really need. Check back!